ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Ordinary Level

PRINCIPLES OF ACCOUTNS 7112/1

PAPER 1

NOVEMBER 2008 SESSION 3 hours

 Section A

Answer all questions in this section.

1. M. Khumalo owns a retail shop. The following trial balance was extracted from
her books on 31 December 2005.

Trial Balance as at 31 December 2005___________________________________

Debit Credit
$ $
Capital 528 000
Drawings 100 000
Fixtures and fittings at cost 120 000
Delivery van at cost 30 000
Provision for depreciation:
Fixtures and fittings on 1 Jan 2005 12 000
Delivery van 30 000
Purchases 850 000
Sales 1 900 000
Stock at 1 January 2005 120 000
Advertising 60 000
Salaries and wages 230 000
Insurance 35 000
Rent 65 000
Repairs 90 000
Commission earned 150 000
Premises 700 000
Bank 58 000
Provision for bad debts
1 January 2005 2 000
Debtors 30 000
Creditors 20 000
2 700 000 2 700 000

Additional information:

(i) Stock at 31 December 2005 was valued at $185 000.

(ii) Goods worth $10 000 had been taken by Khumalo from the business for
private use at selling price. No record had been made in the books.
 (iii) Depreciation is as follows:

- Fixtures and fittings; 10% per annum using the reducing balance
method.
- Delivery van; 10% per annum using the straight line method.

(iv) The insurance figure of #35 000 includes $15 000 covering a period of six
months ending 31 March 2006.

(v) Interest on overdraft of $5 000 had not been recorded in the books.

(vi) Provision for bad debts decreased by $500.

You are required to prepare:

(a) the Trading, Profit and Loss Account for the year ended 31 December
2005. [12]

(b) the Balance Sheet as at 31 December 2005. [13]

2. (a) The following accounts appeared in the General Ledger of Kupfuma, who
owns a retail shop and sublets part of his premises.

RENT RECEIVED ACCOUNT

2006 $ 2006 $
June 30 Profit and Loss January 1 Balanced b/d 100 000
Account 480 000 March 25 Cash 180 000
June 30 Balance c/d 200 000
480 000 480 000
July 1 Balance b/d 200 000

(i) What does the balance of $100 000 represent?

(ii) Give the transaction relating to the entry on 25 March 2006.

(iii) What is the amount of rent chargeable to the tenant for half year ended 30
June 2006?

(iv) Where exactly in the balance sheet does the balance of $200 000 appear?
[4]
 PACKING MATERIALS ACCOUNT

2006 $ 2006 $
January 1 Balance b/d 120 000 June 30 Trading Account 430 000
March 30 Grand Supplies 240 000 June 30 Balance c/d 60 000
June 25 Bank 130 000
490 000 490 000
July 1 Balance b/d 60 000

(v) What does the balance of 120 000 represent?

(vi) Give the transaction relating to the entry on March 30.

(vii) What is the value of the packing materials used during the half year?

(viii) Where exactly in the balance sheet does the balance of $60 000 appear?[4]

(b) The following balance appeared in the Sales Ledger of N. Ncube on 1

March 2006.

D. Pasi $960 000 Dr

During the month of March, the following transactions took place:

March 3 Received $900 000 cash from D. Pasi in full settlement of

his February account.

5 Sold goods on credit to D. Pasi for $750 000 less 10%

trade discount.

7 Sent a credit note to D. Pasi for unsatisfactory goods worth

$75 000 net.

20 Received a cheque from D. Pasi of $600 000.

31 The cheque received from D. Pasi on 20 March was

returned by the bank marked “Refer to drawer.”

You are required to prepare the Ledger account of D. Pasi and balance it
on 31 March 2006. [8]

Pay special attention to dates and details

3. State the word(s) or figure(s) required to complete each of the sentences given
below. Do not copy the whole sentence.

(a) Asset accounts have (i) ________________ balances and accounts for
liabilities have (ii) _____________ balances.

(b) The rate of stock turnover is found by dividing cost of sales by

____________.

(c) A ____________ note is sent to a customer showing an allowance given

by a supplier for goods damaged in transit.

(d) The purchase of fixed assets is (i) ___________ expenditure and payments
for operating expenses are (ii) _____________ expenditure.

(e) If closing stock is undervalued, net profit will be ____________.

(f) Debentures earn a fixed rate of (i) ____________ and preference shares
earn a fixed rate of (ii) ___________.

(g) Interest on capital is a ____________ entry in the Profit and Loss

Appropriation Account.

(h) Fixed assets are valued at $600 000, current assets are $200 000 and
current liabilities total $300 000. The purchase price of a business in $900
000. Goodwill is therefore $ _____________.

(i) Prime cost is the sum of (i) _____________ and (ii) ______________.

(j) The production cost of goods completed is added to the (i)

_____________ stock of finished goods in the (ii) _____________
Account.

(k) Two methods of depreciation are (i) ______________ method and the (ii)
_____________ method.

(l) Expenses incurred by the business for which no payment has been made
are called (i) ______________ and appear in the balance as current (ii)
____________. [19]
4. B. Choto prepared the following trial balance as on 31 December 2005.

DEBIT CREDIT
$ $
Debtors 40 000
Creditors 20 000
Sales 220 000
Purchases 140 000
Stock 65 000
Sundry expenses 15 000
Cash at bank 22 000
Motor vehicles 60 000
Drawings 10 000
Fixtures and fittings 100 000
Discount allowed 5 000
Discount received 3 000
Capital 241 000
457 000 484 000

The trial balance totals did not agree and a Suspense Accoutn was opened for the
difference. Investigations later revealed the following errors:

(i) The purchases of additional fixtures and fittings for $30 000 had been
debited to the Purchases Account.
(ii) The purchases day book had been undercast by $10 000.
(iii) Purchases of $19 800 from S. Moyo had been correctly entered in the
purchases journal but were posted to his account as $18 900.
(iv) An item of $5 100 had been debited twice in the Sundry Expenses
Account.
(v) The sale of goods to D. Nkomo $12 000 had been posted to the wrong side
of her account.
(vi) Discount received amounting to $500 was debited to the Discount
Allowed Account.

You are required to

(a) Show the journal entries necessary to correct the above errors.
[7]

(b) prepare the Suspence Account [7]

 Answer any two questions from this section.

5. (a) B. Siwela is a retailer. The following are her business transactions for the
month of July 2007.

(i) Paid $100 000 by cheque to trade creditors.

(ii) Bought office equipment on credit for $550 000.
(iii) Siwela withdrew $90 000 from the business bank account to pay
for her daughter’s school fees.
(iv) Siwela received a credit note for $150 000 in respect of goods she
had returned to the supplier.
(v) Customers owing $110 000 had their accounts written off as
irrecoverable.
(vi) Siwela brought her private motor vehicle valued at $1 200 000 into
the business.

Copy the following format for your answer:

Item Number Effect On Capital Effect on Working Capital

(i)

(ii)

(iii)

(iv)

(v)

(vi)

You are required to state, under the appropriate heading, the effect of each
transaction on Siwela’s capital and on working capital. State your answer by
writing increase, decrease or no effect under each heading. [12]

(b) State the accounting equation. [1]

6. Tsovani Manufacturing Company provides you with the following information on
31 March 2007.

Stocks 1 Aprila 2006: $

Raw materials 15 500
Work-in-progress 18 100
Finished goods 19 300
Raw materials purchased 55 000
Returns on raw materials 7 500
Depreciation of plant and machinery 6 100
Royalties 10 800
Carriages on purchases 9 600
Manufacturing wages 36 000
Factory wages 10 000
Repairs on plant and machinery 13 200
Rent and rates 24 000
Factory power 16 900
Administration expenses 22 000
Patent fees 24 500
Selling expenses 32 800
Stocks, 31 March 2007:
Raw materials 17 700
Work-in-progress 20 800
Finished goods 21 200

Additional information:

(i) Factory wages amounting to $6 800 were owing at the end of the year.
(ii) Rent and rates to be shared: factory 3 and office 1
4 4.

You are required to prepare Tsovani’s Manufacturing Account for the year ended
31 March 2007. [13]
7. N. Ndou and D. Dube agreed to form a partnership on 1 May 2006. Their balance
sheets as individual retailers on 30 Aprila 2006 were as follows:

N. Ndou Balance Sheet as at 30 April 2006.

$ $
Capital 750 000 Fixtures and fittings 400 000
Creditors 250 000 Furniture 260 000
Stock 90 000
Debtors 110 000
Bank 140 000
1 000 000 1 000 000

D. Dube Balance Sheet as at 30 Aprila 2006.

$ $
Capital 1 000 000 Buildings 800 000
Creditors 400 000 Motor vehicles 300 000
Stock 150 000
Debtors 80 000
Bank 70 000
1 400 000 1 400 000

Ndou and Dube agreed to come together on the following terms:

(i) Ndou’s furniture was revalued at $240 000 and Dube’s buildings at $950 000.

(ii) An amount of $10 000 was to be written off Ndou’s debtors.

(iii) All other assets and liabilities were to be taken over at their balance sheet values.

(iv) Dube will not bring his motor vehicles to the new business.

(v) Ndou will bring in additional $150 000 cash as part of his capital.

You are required to:

(a) Calculate each partner’s capital on 1 May 2006. [6]

(b) Prepare the partnership Balance Sheet as at 1 May 2006. [7]